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Abstract :
The complexity and unpredictability of the contemporary global competitive environment call for a different approach to organizational control and management. From the traditional approach of overemphasizing task specialization, standardization, and rigid control, today's strategic control involves the use and balancing of three separate but interrelated elements, namely, culture, rewards, and boundaries. Each element plays a different role in the development and implementation of an effective system of strategic controls. While culture promotes individual identification with the organization and its objectives, rewards and incentives serve to align individual and organizational goals. However, to achieve a successful organization development effort, the delicate balance and creative tension among culture, incentives, and controls must be maintained at all times.
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Copyright: COPYRIGHT 1997 Elsevier Science Publishers
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Gale Document Number: GALE|A19774022
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BUSI 400: Chapter 9 Strategic Control and
Corporate Governance
Two central aspects of strategic control::: 1) informational control (ability to respond
effectively to environmental change). 2) behavioral control (the appropriate balance and
alignment among a firms culture, rewards, and boundaries)
Two types of control systems : traditional and contemporary
Traditional approach to strategic control::: sequential::: 1) strategies are formulated and
top management sets goals. 2) strategies are implemented. 3) performance is measured
against the predetermined goal set
Adapting to and anticipating both internal and external environmental change is an
integral part of strategic control
Contemporary approach to strategic control:: involves informational control and
behavioral control
Informational control = primarily concerned with whether or not the organization is
‘doing the right things’. Deals with the internal environment as well as the external
strategic context, addresses the assumptions and premises that provide the foundation for
an organizations strategy
Behavioral control = asks if the organization is ‘doing things right’ in the implementation
of its strategy
Contemporary control systems must have 4 characteristics to be effective::: 1) focus is on
constantly changing info that has potential strategic importance, 2) info is important
enough to demand frequent and regular attention from all levels of the organization. 3)
data and information generated are best interpreted and discussed in face-to-face
meetings. 4) control system is a key catalyst for an ongoing debate about underlying data,
assumptions, and action plans
Behavioral control is focused on implementation, effectively implementing strategy
requires manipulating 3 key control levers:: culture, rewards, and boundaries
Organizational culture = a system of shared values (what is important) and beliefs (how
things work) that shape a company’s people, organizational structures, and control
systems to produce behavioral norms (way we do things around here)
Reward systems = reward and incentive systems represent a powerful means of
influencing an organizations culture, focusing efforts on high priority tasks, and
motivating individual and collective task performance. Reward system (by specifying
who gets rewarded and why) is an effective motivator and control mechanism
To be effective, incentive and reward systems need to reinforce basic core values,
enhance cohesion, and commitment to goals and objectives, and meet with the
organizations overall mission and purpose